China cuts chip manufacturing equipment and materials import taxes through 2030

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China semiconductor firms need US designs to thrive

The Chinese government announced it would not charge local chipmakers import taxes for equipment and raw materials through 2030.

Beijing made the move to bolster its domestic semiconductor manufacturing sector, an objective that has become a national priority.

South Korea, the European Union, and the United States have also recently announced plans to increase support for their respective component ecosystems.

China’s New Chip Sector Tax Breaks

The Chinese Ministry of Finance indicated it would waive import duties for production equipment, silicon crystals and wafers, photoresists, polishing pads, face masks, and supplies used to set up clean rooms.

Beijing is giving local companies easier access to chip fabrication equipment and supplies to enhance its semiconductor independence. At present, the East Asian country imports around $300 billion worth of electronic parts every year. Though the region is home to many successful component vendors, their design capabilities and manufacturing processes lag behind their foreign competitors.

Local leaders aim to correct that imbalance by providing greater support for its leading chip sector manufacturers.

The Chinese government declared its ambition to cultivate a $237 billion domestic component market by 2023. Officials indicated the program would include increased financial and regulatory support. Its Ministry of Industry and Information Technology said it would subsidize the construction of new production facilities.

SMIC, China’s largest contract chipmaker, has taken the lead in realizing Beijing’s goals this month. The firm revealed it renewed its contract with ASML Holdings to acquire more etching tools for its factories. It also stated it secured municipal funding to establish a $2.5 billion plant in Shenzhen.

Because the Chinese Finance Ministry decided to lower the burden of launching new fabs in-country, other local companies will likely follow SMIC’s lead soon.

Developing Greater Semiconductor Resources is an International Priority

China is not the only country to prioritize the development of its semiconductor resources this month. Many nations made improving their domestic electronic component production capacity an item on their roadmaps for economic reasons. However, the global chip shortage prompted South Korea, Europe, and the U.S. to devote more resources to expedite that process.

Seoul recently unveiled a plan to pour $176 million into its domestic automotive electronic part sector. Large vehicle manufacturers Hyundai and Kia are based in South Korea but import 98 percent of their components. The country’s leaders hope the capital infusion will help local firms lower their dependency on foreign supplies.

The European Commission outlined an infrastructure modernization project called “Digital Compass” in early March. One of its aims is for the EU to produce 20 percent of the world’s semiconductors by 2030. The trade bloc authorized $172.4 million in R&D funding for three top local chipmakers to further its agenda.

In addition, the U.S. Senate is currently mulling over a bill that would provide $30 billion in funding for the American semiconductor industry. Congress approved similar legislation last summer but did not fund it. However, lawmakers have been moved to action as the chip shortage has disrupted American car production.

The global component industry’s future is hard to gauge given the international prioritization of semiconductor sector development. But one outcome is clear: the field will become considerably stronger and more competitive in the next decade.

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